DRAM Tool Kit TAKE ACTION! 1 2 3 4 Sign Print and share this handout with your legislators, insurance carrier and other operators. Invite your legislators to your business. The IRA will send a staff or Board member to support your meeting. Mark your calendar for JANUARY 23, 2018 to lobby at the capitol with other operators. up for DRAM Reform Alerts at kkostek@restaurantiowa.com or text Dram Alerts and your full name to (515) 322-2411. TAKE ACTION! The Inequity of Iowa s Current DRAM Laws Have Created An Insurance Crisis It s a good thing people in the hospitality business love it, because making money in this industry is hard and it seems as though the state of Iowa is doing everything possible to make it even harder. The Iowa Restaurant Association is working to shed light on the inequity of Iowa s Liquor Liability Laws. Under the state s current, albeit completely antiquated laws, Iowa s hospitality industry stands alone when it comes to taking responsibility for the behavior of individuals who overconsume. Counting Profits in Pennies <$100 On any given day, the average Iowa food and beverage establishment s net profit is $97. TRIFECTA OF INEQUITY DRAM Laws These laws have created a trifecta of inequity for the hospitality industry: unaffordable and insufficient insurance coverage; a legal incentive trail back to any hospitality establishment when something goes wrong; and border businesses unable to compete with their peers on the other side of state lines. Unaffordable insurance Legal incentive back to bar Border businesses can t compete These DRAM laws which allow victims (and in Iowa the alleged intoxicated person himself) to seek damages from a restaurant or bar who sells and serves someone when they knew or should have known that they were intoxicated or would become intoxicated is a practically indefensible standard. While these laws may have made some amount of sense when the only place alcohol was available in Iowa was by the bottle at state run liquor stores or by the drink at a restaurant or bar these laws and standards have not kept up with the reality of the state s liquor sales and consumption landscape. Now the state is pushing the idea of place of last drink laws. Such legislation would have law enforcement rely on information gathered from intoxicated people as investigative tools to identify potential problem bars for future inspections. Really, we re going to trust the person who is drunk? What about identifying potential problem people instead? How about involving everyone who sells alcohol and ask where the place of last purchase was? This proposal, if offered in legislation, simply adds one more burden to Iowa s restaurants and bars while those who sell frozen ice cold mixed drinks in pouches, flight size hard liquor in baskets by checkout stands, and ice cold beer with pizza have no responsibility for their customers. Iowa s restaurants and bars must come together and press for change. We have a bill ready to go next session that is a good first step. It focuses on definitions that, if adopted, should open up the DRAM insurance market, thus increasing competition and driving costs down. Join us today to learn how you can help us bring light to the complete inequity of Iowa s hospitality laws.
DRAM Tool Kit Calls For Reform May Be Too Late Unchanged Prohibition Era Liquor Liability Laws Stunt Hospitality Growth, Drive Operators to Look Outside State for New Opportunities 85 Year Old Liquor Liability Laws Have Not Kept Pace with Iowa s Ever Expanding Vision for Alcohol Formats and Sales Outlets Plain and simple it is time to reform Iowa s liquor liability laws. Failure to do so has already cost Iowa s hospitality industry businesses and jobs particularly in border communities. Since the end of prohibition, Iowa s hospitality establishments have been the sole source of protection and financial compensation for innocent victims hurt by the irresponsible behavior of individuals who over imbibe. This burden is born through a specific category of innocent victim insurance called DRAM an exclusive requirement for restaurants and bars who SELL AND SERVE alcohol. The key words in this definition are AND SERVE. Those who sell, but do not open the package, are not held responsible when consumers overdrink and cause injury or damage to others. Ice Cold Beer with that Pizza? With dozens of single serve alcohol formats readily available everywhere from the local gas station to the pharmacy, it begs the question what does SERVING actually look like today? Oddly enough, selling someone a couple pieces of piping hot pizza on a plate along with an ice cold unopened can of beer is not SERVICE. So why are restaurants and bars the only ones left holding the bag? Out-of-date definitions and liability insurance models have not kept pace with the changing landscape of liquor sales and consumption. While the state and new categories of retailers are profiting from the sale of alcohol in nearly every environment from single serve mixed drinks sold in pouches at drug stores to growler stations at convenience stores with tap setups rivaling many bars the entire cost of poor consumer behavior is laid at the doorsteps of restaurants and taverns. Legal Trail Always Lands at Hospitality Venue Despite everyone joining the food and beverage sales game, only restaurants and bars are held to a legal standard of responsibility for patron s poor behavior. Even those who have not over served or may have refused service to a patron can
be easily drawn into legal and insurance battles for which they played no actual part. Legal teams are incented to connect the dots back to a hospitality venue whenever possible because these businesses are the only group required to carry insurance that covers someone else s irresponsible behavior. It s out-of-date, burdensome and unfair. Head for the Borders All Who Hope to Grow The result has created a hospitality business environment that has become so cost prohibitive, many owners just give up and close. In border communities, operators opt to cross state lines and set up business in Wisconsin, Illinois, Kansas or Nebraska. the insurance industry, regulators and lawmakers to offer common sense liquor liability reform. While the proposed legislation does not extend legal liability for poor patron behavior to those who sell and don t serve, it does limit the financial responsibility of restaurants and bars as well as increase the burden on the intoxicated person. Proposed Reform Solves Some, Not All of The Problem This reform should drive insurance costs down and reduce the number of unwarranted lawsuits against hospitality operators. It is time to take steps toward evening the playing field place limits on the level of financial responsibility restaurants and bars have and increase the burden on those who choose to overconsume. The Iowa Restaurant Association is working with its partners to seek reform. The Association hopes to work with the industry, Failure to do so will cost Iowa businesses and jobs. State Liquor Liability Laws Handicap Every Iowa Hospitality Operation Especially Border Businesses When it comes to providing a hospitality-friendly business environment, every state bordering Iowa is winning. Case in point Nebraska. In speaking with two hospitality operations, one large and one small, about their decisions to operate in Iowa versus Nebraska the cost reality and business dilemma created by Iowa s antiquated liquor liability laws become abundantly clear. Nebraska vs. Iowa Nebraska law prohibits the selling, furnishing, giving away, exchanging, or delivering the sale, gift, or procurement of any alcoholic beverages to or for any minor or to any person who is mentally incompetent. Other than this, Nebraska has no statutory provisions for civil liability of the servers of alcohol. There is no dramshop or civil liability act imposing liability for violations of the statute. Iowa law lets any person collect all damages if the restaurant or bar sells to and serves an intoxicated person when the licensee or permittee knew or should have known the person was intoxicated, or who sold to and served the person to a point where the licensee or permittee knew or should have known the person WOULD become intoxicated.
The Tale of Two Cities Barley s Wrestles with Border Question When Council Bluffs native Matt Johnson, owner of Barley s Bar, decided to sell one of his locations one in Omaha or one in Council Bluffs the liability risk of selling alcohol in each state became a real decision factor. I didn t like running two hospitality businesses. I knew I had to commit to one location. I m a native of Council Bluffs and my heart is in Iowa but the decisions forced upon me not just by the cost of DRAM insurance, but also my personal risk and exposure was real, explains Matt. Comparing my two locations then and now, it s not apples and oranges it s a vegan meal and a juicy steak. I pay thousands more for less coverage in Iowa, but am afforded much less protection as a business owner. In fact, in my Omaha business, DRAM was simply a part of a general liability policy, says Matt. Matt s love of his hometown drove his decision to consolidate into Council Bluffs, but it is a decision fraught with concern. I think Nebraska gets this area of hospitality right. They protect their business operators and employees as long as they are properly trained by shifting liability to the intoxicated person. In Iowa, it doesn t make much of a difference if I train my staff. We have a DRAM standard that is impossible to defend ourselves against. DRAM Tool Kit Saints Opts for Omaha Scott Anderson, an Iowa entrepreneur who has developed popular restaurant concepts such as Saints Pub & Patio, Tonic and Taco Hangover, shared his company s quandary when determining whether or not to choose to expand in Council Bluffs or Omaha. We currently operate our Saints Pub concept in four states Iowa, Missouri, Nebraska and Kansas. DRAM insurance in Iowa is more difficult and much more expensive to obtain. Because we have a single policy that covers all locations, higher Iowa rates also impact what we pay in other states. We have been advised by our insurance broker to keep our combined Iowa alcohol sales under 30% of our total alcohol sales, which slows our rate of growth in Iowa because we need to add two out-of-state locations for every location we add in Iowa, shared Anderson. The company had scoped out sites in Council Bluffs and Omaha. When we looked at expansion opportunities, Iowa DRAM insurance became a strong disincentive to expand within our home state. In fact, we picked our new west Omaha location over a strong Council Bluffs alternative in large part due to Iowa DRAM laws and our insurance broker s advice. It is just easier and cheaper to do business in other states, said Anderson.
Proposed Legislation Seeks to Decrease Liquor Liability Insurance Cost The Iowa Restaurant Association has worked with Iowa legislators to bring common sense insurance reform and increased personal responsibility to situations wherein damages have taken place due to overconsumption of alcohol. The proposed reform does increase the level of assumed responsibility of the alleged intoxicated person for his or her own actions and mitigates somewhat the overwhelming burden on restaurants and bars. Perhaps more importantly the legislation, if passed, should help drive down the cost of liquor liability insurance for restaurant and bar owners. The net result is that restaurants and bars will be able to purchase higher amounts of insurance protection at lower cost. Current 123.92 CIVIL LIABILITY FOR DISPENSING OR SALE AND SERVICE OF BEER, WINE, OR INTOXICATING LIQUOR (DRAMSHOP ACT) LIABILITY INSURANCE UNDERAGE PERSONS. 1. a. Any person who is injured in person or property or means of support by an intoxicated person or resulting from the intoxication of a person, has a right of action for all damages actually sustained, severally or jointly, against any licensee or permittee, whether or not the license or permit was issued by the division or by the licensing authority of any other state, who sold and served any beer, wine, or intoxicating liquor to the intoxicated person when the licensee or permittee knew or should have known the person was intoxicated, or who sold to and served the person to a point where the licensee or permittee knew or should have known the person would become intoxicated. Changes in SSB1179 Change to innocent third party so the intoxicated person himself cannot seek damages Change to a maximum of $75,000 Change to ensure those crossing the border were actually overserved in an Iowa establishment Replace so only someone directly serving someone who is obviously intoxicated is held to account. Ensures a trainable and defensible standard. Proposed 123.92 CIVIL LIABILITY FOR DISPENSING OR SALE AND SERVICE OF BEER, WINE, OR INTOXICATING LIQUOR (DRAMSHOP ACT) LIABILITY INSURANCE UNDERAGE PERSONS. 1. a. Any innocent third-party who is injured in person or property or means of support by an intoxicated person or resulting from the intoxication of a person, has a right of action for damages up to $75,000 actually sustained, severally or jointly, against any licensee or permittee, whether or not the license or permit was issued by the division, who sold and served any beer, wine, or intoxicating liquor directly to a visibly intoxicated person. b. If the injury was proximately caused by an intoxicated person, a permittee or licensee may establish as an affirmative defense that the intoxication did not contribute to the injurious action of the person. b. If the injury was caused by an intoxicated person, a permittee or licensee may establish as an affirmative defense that the intoxication did not contribute to the injurious action of the person. Add the word proximately to ensure that the alcohol was actually the cause of incident.
Alcoholic Beverage Sales is BIG Business for State of Iowa Every year the amount of liquor, beer and wine Iowans buy increases. $330 million DRAM Tool Kit Existing State Excise Tax For Fiscal 2016, Iowa Consumers bought is the amount of revenue the state of Iowa received between markups and state excise tax, from the sale of alcohol in 2016. BEER 19 per gallon WINE $1.75 per gallon SPIRITS 50% markup collected by state BEER 75.3 million gallons WINE 4.52 million gallons SPIRITS 5.2 million gallons --Source Iowa ABD The vast majority of the funds generated are appropriated to various state programs by the Iowa General Assembly. Iowa currently collects the 3rd highest wine tax and the 25th highest tax on beer. Because Iowa collects a 50% markup on distilled spirits as one of 18 control states, there is no applicable comparison to other states. Bill Seeks Fairness in Liquor Liability The Iowa Restaurant Association has 1 collaborated with several insurance groups to create an aggressive DRAM reform bill SSB1179. If passed, the legislation will cap liability on operators, 2 place more responsibility on those who over consume, and change the standard of liability for servers and owners from known or should have known someone 3 would become intoxicated to served a visibly intoxicated person. We are already building support for the bill and have had a number of groups register in favor of the legislation. 4 Ask Read the Bill and Know the Number SSB1179 Share Your Unfair or High Cost DRAM Stories with Jessica Dunker Agree to be part of Our Book 99 Operators, 99 DRAM Stories where we write a one paragraph synopsis of what you re dealing with MEMORIZE SSB 1179 everyone to support us your insurance provider, visitor s bureau, liquor purveyors, beer wholesaler and most importantly your legislator Visit our website at www.restaurantiowa.com for a toolkit on helping us gain support for significant DRAM reform.
Who Pays When People Overconsume... With the expansion of liquor sales in the state of Iowa, consumers can now purchase adult...in Iowa? beverages in a wide variety of places. This, in combination with a reduction in the legal blood alcohol content, has substantially decreased the market share of alcohol sales for restaurants and bars. However, the liability of selling alcohol has not changed. The only time an innocent victim is guaranteed reparations if harmed is if a line of liability can be drawn back to a restaurant or bar. This has created an environment which incents trial teams to look for ways to track a person who has done harm back to a restaurant or bar even if the operator did not over serve. What s more, there is no guarantee of protection if alcohol was purchased somewhere else even if a retail or convenience store clerk recognizes that the person they are selling alcohol to is intoxicated. RESTAURANT & BAR BIG BOX STORE RETAIL PHARMACY CONVENIENCE STORE GROCERY STORE NOT COVERED! NOT COVERED! NOT COVERED! NOT COVERED! COVERED Insurance Grade for Liquor Liability by State 0 3 0 4 0 off premise 7 for on premise 0 off premise 4 for on premise 2 3 Scale 0 = Best Insurance Environment 10 = Worst Insurance Environment...in Other States? The reality of the inequity of Iowa s approach to liquor liability coverage has not been lost on the insurance industry. The Insurance Services Office (ISO) is an independent supplier of statistical, actuarial, underwriting, and claims data which is used by the property/casualty insurance industry to determine whether to enter a market, what products to offer and how to price insurance. The ISO gives all 50 states a grade which helps insurance providers determine whether or not the business is worth the exposure risk. 0 is a highly desirable score. 10 is the worst possible score. Only four states have a grade which differentiates between on premise and off premise sales Iowa is one of those four. Of those four, Iowa has the highest grade disparity between on-premise and off-premise liability. We have the most inequitable score in the nation. Only three states have a score higher (meaning worse) than Iowa s restaurants and bars for insurability. The score for convenience stores, grocery stores, pharmacies, big box stores and other retailers in Iowa is 0. Every Iowa hospitality establishment along the border is operating at a significant disadvantage to those in neighboring states.
Iowa RESTAURANT INDUSTRY AT A GLANCE Restaurants are a driving force in Iowa s economy. They provide jobs and build careers for thousands of people, and play a vital role in local communities throughout the state. 6,129 Eating and drinking place locations in Iowa in 2015 $4.4 billion Projected sales in Iowa s restaurants in 2017 153,700 Restaurant and foodservice jobs in Iowa in 2017 = 10% of employment in the state And by 2027, that number is projected to grow by 10.8% = 16,600 additional jobs, for a total of 170,300 HOW BIG IS AMERICA S RESTAURANT INDUSTRY? LOCATIONS SALES EMPLOYMENT 1 MILLION+ serving millions every day $799 BILLION = 4% of the U.S. GDP 14.7 MILLION PEOPLE = 10% of the nation s workforce FOR MORE INFORMATION: Restaurant.org RestaurantIowa.com 2017 National Restaurant Association. All rights reserved.